Economics & AnalysisPregunta 4 de 110
An investor expects $10,000 in 5 years and wants its present value at a 6% annual discount rate. Which statement is correct?
a.The present value equals $10,000 multiplied by 1.06 raised to the fifth power
b.The present value is greater than $10,000
c.A higher discount rate would raise the present value
d.The present value equals $10,000 divided by 1.06 raised to the fifth power
Explicación
Present value discounts a future amount back to today by dividing by (1 + rate) raised to the number of periods. Because money has time value, the present value is less than the future $10,000. A higher discount rate lowers, not raises, present value.
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